Economic activity in 2016 was driven mainly by structural public investment and the dynamism of the private sector. This trend continued in 2017, with real GDP growth estimated at 8%, despite domestic and external shocks at the beginning of the year. The 35% drop in the price of cocoa, the main source of export earnings, between November 2016 and January 2017 led to an estimated CFAF 200 billion loss for local producers. Growth was helped by the upswing in the primary sector, the good performance of the energy sector, and higher domestic consumption. Due to the dynamism of the secondary and tertiary sectors, growth is projected to reach 7.9% in 2018 and 7.8% in 2019.

Macroeconomic evolution

In December 2017, the IMF completed the second reviews of Côte d’Ivoire program supported by the Extended Credit Facility and the Extended Fund Facility, which allowed disbursements of $137 million. Performance under the program was considered strong enough for the decisions on the reviews to take place without a Board meeting. The budget deficit was estimated at 4.5% of GDP in 2017, higher than the anticipated 3.7%. This deterioration is explained by several internal and external shocks, including the downward revision of the single exit tax and registration duty, which are intended to support producer prices and to limit revenue losses to 0.5% of GDP.

Social demands resulted in additional one-off expenditures of 0.6% of GDP in 2017 and are projected to require recurrent spending equal to at least 0.07% of GDP in 2018. The deficit is projected to gradually decrease to 3.8% in 2018 and to 2.8% in 2019. Inflation stood at 0.7% in 2016, was estimated at 1% in 2017, and is projected to remain moderate, at 1.8% in 2018 and 1.9% 2019. Debt remains under control; in 2016, the country was considered a moderate risk by the International Monetary Fund. However, the consolidation of repayments due on 2014 and 2015 Eurobonds over 2024–28 poses a potential risk to debt sustainability.

Tailwinds

Several factors could consolidate the health of the economy, including the Economic and Financial Program 2016–2019 and reforms set out in the Memorandum of Economic and Financial Policies 2016–2019. In addition, a $525 million grant for the Millennium Challenge Corporation Program Compact will strengthen economic competitiveness through investment in education, technical and vocational training, and transportation. The country was selected to benefit from the G20 Compact with Africa, which is expected to boost the private sector, particularly through increased foreign direct investment (FDI). In addition, Côte d’Ivoire is continuing to improve the business environment with its Focus on Doing Business program, which has increased digitization and simplified procedures.

Headwinds

Membership in a monetary union helps Côte d’Ivoire maintain low inflation rates. But it limits its options for adjusting to negative shocks and ensuring external competitiveness. Some major fiscal issues remain to be resolved. The government still carries large, unpaid bills and past liabilities of about CFAF 150 billion, dating back to extrabudgetary spending in 1993–2002. In addition, unpaid bills and liabilities to independent power and gas producers are estimated at 1.1 percent of GDP. The authorities should also monitor the arrangements reached with mutinous soldiers and striking civil servants to ensure that there are no new flare-ups and conflicts.

The economy remains vulnerable to negative macroeconomic shocks, particularly those related to exports (lower commodity prices) and FDI. A continuing decline in the price of cocoa could lead to social tensions similar to those in 2017. This vulnerability is a reminder that the country needs to accelerate its economic diversification and identify alternate sources of growth to reduce its dependence on cocoa beans. The upcoming elections in 2020 and the uncertainty surrounding a reshuffling of political forces could be additional sources of instability.

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